20th Sep 2006 07:01
Berkeley Group Holdings (The) PLC20 September 2006 THE BERKELEY GROUP HOLDINGS PLC THE BERKELEY GROUP HOLDINGS PLC ("BERKELEY") ANNOUNCES THE Acquisition of the OUTSTANDING 50 per cent interest in ST JAMES GROUP LIMITED ("St JaMES") not already owned by BERKELEY FROM THAMES WATER (THE "PROPOSED ACQUISITION") Introduction and Summary of Proposed Acquisition The Board of Berkeley announces that its wholly owned subsidiary, The BerkeleyGroup plc, has entered into a sale and purchase agreement with RWE Thames Waterplc ("Thames") to acquire from Thames the 50% interest in St James that is doesnot already own. Berkeley will make payments of approximately £97.5 million tocomplete the Proposed Acquisition. Of this: £€68.6 million relates to the purchase of the ordinary share capital of St James owned by Thames; and £€28.9 million relates to the settlement and refinancing of shareholder loans owed by St James to Thames. In addition, at the same time as the Proposed Acquisition, St James will settleoutstanding land creditors with, and acquire six previously identified andnegotiated development sites from, a subsidiary of Thames, for a total value ofapproximately £93.5 million. Consequently, on completion of the Proposed Acquisition, Thames' group willreceive, in aggregate, £191 million: £97.5 million from Berkeley and St James inrespect of the Proposed Acquisition and £93.5 million from St James from theacceleration of the payment of land creditors and the six new development sites. Due to its size and the fact that it is with a related party, the ProposedAcquisition requires the approval of Berkeley shareholders. Further details willbe published shortly in a shareholder circular that will include a Notice of theExtraordinary General Meeting at which the ordinary resolution that is requiredto approve the Proposed Acquisition will be tabled. Background to and Reasons for the Proposed Acquisition St James was established as a 50:50 joint venture company by the Thames andBerkeley groups in May 1996 to develop residential St James sites and sitesacquired on the open market. Since it was established, St James has proved a highly successful joint venturefor its shareholders completing some 5,000 unit sales, with its operating profitincreasing from £2 million in its first full year of trading to £34.8 million inits statutory accounts for the year ended 31st December 2005. The Proposed Acquisition is a further significant step in the execution of thestrategy which was put in place by the Board in June 2004. This strategy focusesBerkeley primarily on mixed-use large scale urban regeneration in London and theSouth-East of England. It recognises that Berkeley operates in a cyclicalindustry and that this, combined with the nature and complexity of urbanregeneration, means that the business is not scaleable in the traditional sense.This is due to the availability of appropriate land opportunities, the planningsystem in which we operate and the complexity of delivering large urbanregeneration schemes, all of which require intensive management from experiencedentrepreneurial teams. The working capital requirement of this focused business has enabled Berkeley toput in place, through a Scheme of Arrangement and Reduction of Capital approvedby Berkeley shareholders and the Courts in October 2004, a return of £12 pershare in cash to Berkeley shareholders by January 2011. The first £5 wasreturned in December 2004 and the remaining three tranches of £2, £2 and £3 pershare are on target for payment in January 2007, 2009 and 2011 respectively. On 8th July 2005 Berkeley completed the disposal of the Crosby Group, a divisionbased in the Midlands and North of England, realising £250.7 million of cash, atransaction that fully complemented Berkeley's strategy. It accelerated thereturns from Crosby, leaving a more focused development portfolio based aroundBerkeley's core markets of London and the South-East of England thus givingBerkeley increased financial flexibility to take advantage of opportunities inthese core markets as they arise. The Proposed Acquisition represents such an opportunity. As a joint venturepartner, Berkeley has an intimate knowledge of St James' business and, inparticular, its land bank which includes an increasing proportion of third partyland. St James is now an established business in its own right and has a strongmanagement team, a number of whom were transferred from Berkeley. St Jamesoperates under the same management philosophy and on the same operating systemsand procedures as Berkeley's 100% owned divisions. For these reasons there isonly limited integration risk associated with the Proposed Acquisition. Inessence, this is an opportune time for Berkeley to acquire the remaining 50% ofa business to which it is fully committed and in which it already invests asignificant degree of management time and expertise. Information on St James Like Berkeley, St James is a residential-led property development companyfocusing on urban regeneration in London and the South-East of England. It hasbecome renowned for its high quality design-led developments which have becomeexemplars of brownfield regeneration, refurbished buildings and sustainablecommunities. St James operates from four offices; its head office in Hampton Hill and itsthree regional offices in Finchley, Worcester Park and Reading. The major sites St James is developing are Grosvenor Waterside, Pimlico(London); The Hamptons, Worcester Park (Surrey); New River Village, Hornsey(London); OneSE8, Deptford (London); Kennett Island, Reading (Berkshire); TheManor, Lower Earley (Berkshire); Kingsway Square, Battersea (London), ThePumphouse, Hammersmith (London); and Raeburn House, Harrow (Middlesex); Recently acquired major sites include Roehampton Hospital, Roehampton (London),Connington Road Lewisham (London), SIRA Institute, Chiselhurst (Kent) andQwarterside, Enfield (Essex). The first three of these four sites were acquiredfrom third parties with only Qwarterside being a Thames site. In its statutory accounts for the year ended 31st December 2005 (which areprepared under UK GAAP), St James reported operating profit of £34.8 million onturnover of £319.5 million. This was from gross assets of £348.2 million and netassets of £73.6 million, or £133.4 million when shareholders' loans areincluded, at 31st December 2005. Following the acquisition of the six new sites,which contain approximately 700 plots, St James' land bank will total some 5,000plots on 23 sites. Since 31st December 2005, trading has continued to be satisfactory for St James. Financial Effects of the Proposed Acquisition On completion of the Proposed Acquisition, Thames' group will receive £191million from the enlarged Berkeley Group; £97.5 million from Berkeley and StJames and £93.5 million from St James. Berkeley is able to meet the £97.5 million required for the Proposed Acquisitionfrom its existing cash resources and bank facilities. In its last two financialyears Berkeley has generated £718 million of cash before payments toshareholders. This performance is the result of both the strength of the cashgeneration in the ongoing business as well as the acceleration of cash flow fromthe disposal of Crosby. It enables Berkeley to take advantage of opportunitiesin its core markets, such as the Proposed Acquisition, whilst not affecting itsability to meet the remaining three B share payments. At 30th April 2006, Berkeley held cash balances of £220.6 million and hadundrawn available facilities of £375 million which are in place until August2011. The cost of the 2006 B share payment which is scheduled for January 2007is £242 million. The £93.5 million required for St James to settle its outstanding land creditorswith, and acquire the six additional development sites from, Thames will be metfrom St James' existing financial resources and bank facilities. At 31stDecember 2005, St James had drawn £66.8 million of its £200 million bankfacilities. END For further information please contact: The Berkeley Group Holdings plc Cardew Group A W Pidgley Tim Robertson R C Perrins Sofia Rehman T: 01932 868555 T: 0207 930 0777 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Berkeley Group